Possible consequences of awarding non compensatory damages for breach of contract on Commercial Law

Master's Thesis , 2010 , 28 Pages , Grade: B+

Law - Comparative Legal Systems, Comparative Law

In the now famous Blake case the majority in the House of Lords has granted a (restitutionary) remedy for a breach of contract which has been alien to the law of contract so far. Although it was held to be available only in exceptional circumstances the judgment prompted Lord Hobhouse to express the following warning in his dissenting opinion:
"If some more extensive principle of awarding non compensatory damages for breach of contract is to be introduced into our commercial law, the consequences will be very far-reaching and disruptive."
It is the goal of this essay to examine whether Lord Hobhouse’s fear of a silent reconceptualisation of the law of contract is justified. In order to fully understand the potential impact of the Blake case it is vital to bring oneself to mind what the law of contract was before the judgement in Blake was rendered. Accordingly the essay will start with an outline as to which remedies were and in fact still are available to a claimant under the pre-Blake law.
After a summary of the Blake case itself, it will be described why a broad Blake remedy indeed might have a revolutionary effect on the conventional law of contract. However, – as history shows – not all revolutions are bad. Thus, even if Blake should have far-reaching and disruptive consequences on the law of contract it is by no means said that this is an undesirable result. It should be borne in mind that the law of contract is a default system that provides remedies for a breach of contract in case the parties did not – unconsciously or deliberately – stipulate their own remedies which they are free to do. Ideally this default system leads to just and economically reasonable results. By this measure a default system has to prove its value and practicability. Thus, if it turns out that a law of contract under which the Blake remedy is generally available is superior to the current law its implementation must not be declined only because of its revolutionary character. Part IV of this essay draws the necessary comparison between the two alternatives in terms of economic efficiency. In doing so special attention is given to what is called the “efficient breach theory”, which is often called upon to defend the current contractual rules. The essay will then conclude with a final assessment as to what the contract of law should be like in the author’s opinion.

Inhaltsverzeichnis (Table of Contents)

• Introduction.
• The Law of Contract De Lege Lata - The Law of Contract as It Is
  • The Remedies for Breaches of Contract
  • Compensatory Damages as the primary remedy..
    • The Protected Interests..
    • Limitations on the Recovery of Damages..
  • Literal Enforcement as Exceptional Remedy.
    • Specific Performance.
    • Injunctions......
  • The Settled Restitutionary Remedies.
    • The law of contract as a default system
• A-G v Blake
  • The Factual Background.
  • The Judgement.
  • The Potential Consequences of a Generally Available Blake Remedy on the Orthodox Law of Contract....
• The Law of Contract De lege ferenda - The Law of contract as it should be?..
  • The Morality Approach........
  • The Economic Approach ......
  • Statement.....
  • Efficient Breach or Efficient Performance?.
    • The efficient breach theory
    • Maximizing Profit Breaches
      • Cost-related arguments
        • Allocation of the Contractual Resources
        • Transaction Costs
          • The Need to Negotiate for Release..
          • The Need to Oust the Default System .....
      • Non-cost Related Arguments
        • Who Should Make the First Move?
        • The Parties' Expectations....
        • The Non-Monetary Inconviences....
        • Disincentive to Co-operate..
        • The Impact on Third Parties..
        • Inconsistency of the theory of efficient breach with other legal institutions ..
        • The Risk of Uncompensated Losses.
    • Minimizing loss cases.
      • Example 1
      • Example 2
      • Example 3
      • Evaluation
  • Conclusion

  Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

  The primary objective of this essay is to critically examine whether Lord Hobhouse’s concern regarding the potential consequences of the Blake remedy on commercial law is justified. The essay aims to analyze the potential impact of the Blake remedy on the pre-existing law of contract, specifically focusing on the availability of remedies and the principles of efficient breach and performance.

  • The potential impact of the Blake remedy on the existing remedies in contract law.
  • The comparison between the traditional law of contract and a system incorporating the Blake remedy.
  • The efficiency of different contractual systems in terms of economic outcomes.
  • The concept of "efficient breach" and its implications for the law of contract.
  • The theoretical underpinnings and practical implications of the Blake remedy.

  Zusammenfassung der Kapitel (Chapter Summaries)

  • Introduction: Introduces the Blake case and Lord Hobhouse's warning about the potential disruptive consequences of awarding non-compensatory damages for breach of contract. The essay sets out its goal to explore the validity of this fear and examine the potential impact of the Blake remedy on the existing law of contract.
  • The Law of Contract De Lege Lata: This chapter provides an overview of the remedies available to claimants under the pre-Blake law of contract. It discusses the traditional remedies, such as compensatory damages, literal enforcement, and restitution, emphasizing the dominant role of compensatory damages.
  • A-G v Blake: This chapter summarizes the factual background and the judgment in the landmark Blake case. It explores the implications of the Blake remedy, which grants restitutionary relief in exceptional circumstances, and highlights the potential ramifications for the traditional law of contract.
  • The Law of Contract De lege ferenda: This chapter examines the law of contract from a theoretical perspective, considering both moral and economic approaches. It introduces the concept of "efficient breach," which suggests that breaching a contract can be economically beneficial in certain circumstances. The chapter explores the arguments for and against efficient breach, examining its potential implications for contractual justice and economic efficiency.

  Schlüsselwörter (Keywords)

  This essay focuses on the law of contract, particularly the remedies available for breaches of contract. It explores the concept of efficient breach, analyzes the Blake case and its potential impact on the traditional law of contract, and discusses the principles of compensatory damages, restitution, and literal enforcement. The primary themes are economic efficiency, contractual justice, and the potential for legal reform.

• College: University of Auckland
• Course: Remedies for breach of contract
• Grade: B+
• Author: Sebastian Röder (Author)
• Publication Year: 2010
• Pages: 28
• Catalog Number: V282323
• ISBN (eBook): 9783656821243
• ISBN (Book): 9783656821267
• Language: English
• Tags: Common law, International law, Contract law, Remedies